Japan’s firms struggle with price hikes as inflation returns
Consumers and small businesses feel uneasy about raising prices after decades of deflation, even as costs climb.
Key points
- Uniqlo reversed a sock price increase after a public backlash
- Saizeriya apologised and later said it would look for ways to cut prices again
- The Bank of Japan says its 2 per cent inflation target has been met
- Economists expect Japanese consumers to take three to four years to accept steady inflation
Japanese companies are finding it hard to raise prices, according to a report by AFP, carried by CNA. A price rise by clothing brand Uniqlo on its basic socks last month drew public criticism, and the company quickly reversed the change. Restaurant chain Saizeriya also faced anger after it raised the price of its Milanese Doria by 20 yen, which is about US$0.13.
The Bank of Japan said last month that its 2 per cent inflation target had been reached. That milestone follows 13 years of very loose monetary policy. Policies launched in 2013 under Shinzo Abe, who was prime minister at that time, were kept in place by later cabinets. They aimed to end a long stretch of falling prices that started in the mid-1990s.
How prices began to rise again
Inflation only began to return in 2022, when the war in Ukraine caused a global energy shock. Japan has few natural resources, so it was affected strongly. Later, the US-Israel war on Iran led Tehran to disrupt the Strait of Hormuz. That cut crude exports from the Middle East and disrupted global supply chains, which pushed up company costs further.
Many firms in other countries have been able to pass on higher costs, although customers often complain. In Japan, however, many people believe price rises are unacceptable. Businesses have been reluctant to make large increases for fear of losing customers. Small shops in rural areas are particularly exposed, because they depend heavily on regular customers.
Small businesses and households under pressure
Sachi, a 68-year-old ramen shop owner in western Japan’s Okayama region, said she has held off raising prices despite rising costs. She told AFP that she feels guilty about asking loyal customers to pay more. Sachi gave only her first name.
Higher grocery bills have left many households with less money for other spending, such as eating out or buying clothes. Labour ministry figures show real wages have risen year on year for eight months in a row. Still, some people say their budgets are tight. Tokyo office worker Kazuhiko Sato told AFP that he now buys more imported food because local products cost more, and he eats out less.
Interest rates and the outlook
The Bank of Japan has started raising interest rates to slow inflation. Borrowing costs are at their highest level in more than 30 years and are expected to rise again. Tsutomu Watanabe, who teaches economics at the University of Tokyo, said pay rises remain largely insufficient and do not reach everyone.
Watanabe said other Group of Seven economies face similar or higher inflation, but wage growth there has been strong enough to keep spending steady. He described Japan as still healing after decades of falling prices. He also said companies’ ability to raise prices is still largely controlled by consumers. In his view, it may take another three to four years before Japanese consumers accept ongoing inflation as a normal result of higher wages.
Frequently asked questions
Why are price hikes difficult in Japan?
According to AFP, many Japanese people see price rises as taboo after decades of deflation. Businesses, especially small ones that rely on loyal customers, are often reluctant to raise prices sharply.
What happened with Uniqlo and Saizeriya?
Uniqlo raised the price of its basic socks last month but quickly reversed the decision after a backlash. Saizeriya raised prices on almost all menu items, apologised, and said it would look for ways to lower prices again.
Has Japan reached its inflation target?
The Bank of Japan said last month that its 2 per cent inflation target had been met. It followed 13 years of ultra-loose monetary policy.
Sources
This article was written with the help of AI from reports by the outlets listed above. See our Editorial Policy. Spotted a mistake? Tell us.
